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Section 1: 10-Q (10-Q)

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Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________________________________
Form 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from          to
Commission File Number 1-13232 (Apartment Investment and Management Company)
Commission File Number 0-24497 (AIMCO Properties, L.P.)
 
Apartment Investment and Management Company
AIMCO Properties, L.P.
(Exact name of registrant as specified in its charter)
 
Maryland (Apartment Investment and Management Company)
 
84-1259577
 
Delaware (AIMCO Properties, L.P.)
 
84-1275621
 
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
 
 
4582 South Ulster Street, Suite 1100
 
 
 
Denver, Colorado
 
80237
 
(Address of principal executive offices)
 
(Zip Code)
 
(303) 757-8101
(Registrant’s telephone number, including area code)
 
Not Applicable
(Former name, former address, and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Apartment Investment and Management Company: Yes x    No o
AIMCO Properties, L.P.: Yes x    No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Apartment Investment and Management Company: Yes x    No o
AIMCO Properties, L.P.: Yes x    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Apartment Investment and Management Company:
Large accelerated filer
x
 
Accelerated filer
o
Non-accelerated filer
o
(Do not check if a smaller reporting company)
Smaller reporting company
o
 
 
 
Emerging growth company
o
 
 
 
 
 
AIMCO Properties, L.P.:
Large accelerated filer
o
 
Accelerated filer
x
Non-accelerated filer
o
(Do not check if a smaller reporting company)
Smaller reporting company
o
 
 
 
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Apartment Investment and Management Company:
o
 
 
AIMCO Properties, L.P.:
o
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Apartment Investment and Management Company: Yes
o
No
x
AIMCO Properties, L.P.: Yes
o
No
x
 
 
 
 
 
 
 
 
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
 
 
 
 
 
 
 
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Aimco Investment and Management Company Class A Common Stock
AIV
New York Stock Exchange
_________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
The number of shares of Apartment Investment and Management Company Class A Common Stock outstanding as of May 2, 2019: 148,828,469
The number of AIMCO Properties, L.P. Partnership Common Units outstanding as of May 2, 2019: 158,492,651
 


Table of Contents

EXPLANATORY NOTE
This filing combines the reports on Form 10-Q for the quarterly period ended March 31, 2019, of Apartment Investment and Management Company, or Aimco, and AIMCO Properties, L.P., or the Aimco Operating Partnership. Where it is important to distinguish between the two entities, we refer to them specifically. Otherwise, references to “we,” “us” or “our” mean, collectively, Aimco, the Aimco Operating Partnership and their consolidated entities.
Aimco, a Maryland corporation, is a self-administered and self-managed real estate investment trust, or REIT. Aimco, through wholly-owned subsidiaries, is the general and special limited partner of, and as of March 31, 2019, owned a 93.9% ownership interest in the common partnership units of, the Aimco Operating Partnership. The remaining 6.1% interest is owned by limited partners. As the sole general partner of the Aimco Operating Partnership, Aimco has exclusive control of the Aimco Operating Partnership’s day-to-day management.
The Aimco Operating Partnership holds all of Aimco’s assets and manages the daily operations of Aimco’s business. Pursuant to the Aimco Operating Partnership agreement, Aimco is required to contribute to the Aimco Operating Partnership all proceeds from the offerings of its securities. In exchange for the contribution of such proceeds, Aimco receives additional interests in the Aimco Operating Partnership with similar terms (e.g., if Aimco contributes proceeds of a stock offering, Aimco receives partnership units with terms substantially similar to the stock issued by Aimco).
We believe combining the periodic reports of Aimco and the Aimco Operating Partnership into this single report provides the following benefits:
We present our business as a whole, in the same manner our management views and operates the business;
We eliminate duplicative disclosure and provide a more streamlined and readable presentation because a substantial portion of the disclosures apply to both Aimco and the Aimco Operating Partnership; and
We save time and cost through the preparation of a single combined report rather than two separate reports.
We operate Aimco and the Aimco Operating Partnership as one enterprise, the management of Aimco directs the management and operations of the Aimco Operating Partnership, and the members of the Board of Directors of Aimco are identical to those of the Aimco Operating Partnership.
We believe it is important to understand the few differences between Aimco and the Aimco Operating Partnership in the context of how Aimco and the Aimco Operating Partnership operate as a consolidated company. Aimco has no assets or liabilities other than its investment in the Aimco Operating Partnership. Also, Aimco is a corporation that issues publicly traded equity from time to time, whereas the Aimco Operating Partnership is a partnership that has no publicly traded equity. Except for the net proceeds from stock offerings by Aimco, which are contributed to the Aimco Operating Partnership in exchange for additional limited partnership interests (of a similar type and in an amount equal to the shares of stock sold in the offering), the Aimco Operating Partnership generates all remaining capital required by its business. These sources include the Aimco Operating Partnership’s working capital, net cash provided by operating activities, borrowings under its revolving credit facility, the issuance of debt and equity securities, including additional partnership units, and proceeds received from the sale of apartment communities.
Equity, partners’ capital and noncontrolling interests are the main areas of difference between the condensed consolidated financial statements of Aimco and those of the Aimco Operating Partnership. Interests in the Aimco Operating Partnership held by entities other than Aimco, which we refer to as OP Units, are classified within partners’ capital in the Aimco Operating Partnership’s financial statements and as noncontrolling interests in Aimco’s financial statements.
To help investors understand the differences between Aimco and the Aimco Operating Partnership, this report provides: separate condensed consolidated financial statements for Aimco and the Aimco Operating Partnership; a single set of condensed consolidated notes to such financial statements that includes separate discussions of each entity’s stockholders’ equity or partners’ capital, as applicable; and a combined Management’s Discussion and Analysis of Financial Condition and Results of Operations section that includes discrete information related to each entity, where appropriate.
This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for Aimco and the Aimco Operating Partnership in order to establish that the requisite certifications have been made and that Aimco and the Aimco Operating Partnership are both compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. §1350.

1

Table of Contents

APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.

TABLE OF CONTENTS

FORM 10-Q

 
 
Page
 
 
ITEM 1.
 
 
 
 
 
 
 
Condensed Consolidated Statements of Equity (Unaudited)
 
 
 
 
 
 
 
Condensed Consolidated Statements of Partners’ Capital (Unaudited)
 
 
ITEM 2.
ITEM 3.
ITEM 4.
 
 
ITEM 1A.
ITEM 2.
ITEM 6.
Signatures
.


2

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1.
Financial Statements
 
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
 
March 31,
2019
 
December 31,
2018
ASSETS
 
 
 
Buildings and improvements
$
6,493,539

 
$
6,552,065

Land
1,731,980

 
1,756,525

Total real estate
8,225,519

 
8,308,590

Accumulated depreciation
(2,581,666
)
 
(2,585,115
)
Net real estate
5,643,853

 
5,723,475

Cash and cash equivalents
162,286

 
36,858

Restricted cash
36,103

 
35,737

Other assets
441,527

 
351,541

Assets held for sale

 
42,393

Total assets
$
6,283,769

 
$
6,190,004

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Non-recourse property debt, net
$
3,859,023

 
$
3,915,305

Revolving credit facility borrowings
70,000

 
160,360

Total indebtedness
3,929,023

 
4,075,665

Accrued liabilities and other
293,279

 
226,230

Liabilities related to assets held for sale

 
23,177

Total liabilities
4,222,302

 
4,325,072

Preferred noncontrolling interests in Aimco Operating Partnership
101,195

 
101,291

Commitments and contingencies (Note 5)

 

Equity:
 
 
 
Perpetual Preferred Stock
125,000

 
125,000

Common Stock, $0.01 par value, 500,787,260 shares authorized, 148,758,031 and 144,623,034 shares issued/outstanding at March 31, 2019 and December 31, 2018, respectively
1,488

 
1,446

Additional paid-in capital
3,495,295

 
3,515,686

Accumulated other comprehensive income
4,851

 
4,794

Distributions in excess of earnings
(1,742,998
)
 
(1,947,507
)
Total Aimco equity
1,883,636

 
1,699,419

Noncontrolling interests in consolidated real estate partnerships
(2,857
)
 
(2,967
)
Common noncontrolling interests in Aimco Operating Partnership
79,493

 
67,189

Total equity
1,960,272

 
1,763,641

Total liabilities and equity
$
6,283,769

 
$
6,190,004


See notes to condensed consolidated financial statements.
3


Table of Contents

APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

 
Three Months Ended
 
March 31,
 
2019
 
2018
REVENUES
 
 
 
Rental and other property revenues attributable to real estate
$
230,235

 
$
225,393

Asset Management business rental and tax credit revenues

 
22,327

Total revenues
230,235

 
247,720

OPERATING EXPENSES
 
 
 
Property operating expenses attributable to real estate
79,184

 
78,287

Property operating expenses of partnerships served by Asset Management business

 
9,195

Depreciation and amortization
93,565

 
92,548

General and administrative expenses
10,369

 
11,355

Other expenses, net
5,703

 
2,958

Total operating expenses
188,821

 
194,343

 
 
 
 
Interest income
2,726

 
2,172

Interest expense
(41,409
)
 
(47,795
)
Gain on dispositions of real estate
291,473

 
53,195

Other, net
72

 
224

Income before income tax (expense) benefit
294,276

 
61,173

Income tax (expense) benefit
(2,981
)
 
34,517

Net income
291,295

 
95,690

Noncontrolling interests:
 
 
 
Net income attributable to noncontrolling interests in consolidated real estate partnerships
(91
)
 
(6,206
)
Net income attributable to preferred noncontrolling interests in Aimco Operating Partnership
(1,934
)
 
(1,937
)
Net income attributable to common noncontrolling interests in Aimco Operating Partnership
(15,137
)
 
(3,755
)
Net income attributable to noncontrolling interests
(17,162
)
 
(11,898
)
Net income attributable to Aimco
274,133

 
83,792

Net income attributable to Aimco preferred stockholders
(2,148
)
 
(2,148
)
Net income attributable to participating securities
(417
)
 
(119
)
Net income attributable to Aimco common stockholders
$
271,568

 
$
81,525

 
 
 
 
Net income attributable to Aimco per common share – basic and diluted
$
1.88

 
$
0.54

 
 
 
 
Weighted average common shares outstanding – basic
144,232

 
151,872

Weighted average common shares outstanding – diluted
144,445

 
152,000


See notes to condensed consolidated financial statements.
4


Table of Contents

APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)

 
Three Months Ended
 
March 31,
 
2019
 
2018
Net income
$
291,295

 
$
95,690

Other comprehensive gain (loss):
 
 
 
Unrealized gains (losses) on available for sale debt securities
61

 
(600
)
Unrealized gains on interest rate swaps

 
419

Losses on interest rate swaps reclassified into earnings from accumulated other comprehensive loss

 
119

Other comprehensive gain (loss)
61

 
(62
)
Comprehensive income
291,356

 
95,628

Comprehensive income attributable to noncontrolling interests
(17,166
)
 
(11,895
)
Comprehensive income attributable to Aimco
$
274,190

 
$
83,733



See notes to condensed consolidated financial statements.
5


Table of Contents

APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(Unaudited)
 
Preferred Stock
 
Common Stock
 
Additional Paid-in Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Distributions in Excess of Earnings
 
Total Aimco Equity
 
Common Noncontrolling interests in Aimco Operating Partnerships
 
Noncontrolling interests in consolidated real estate partnerships
 
Total Equity
 
Shares Issued
 
Amount
 
Shares Issued
 
Amount
 
 
 
 
 
 
 
Balances at December 31, 2017
5,000

 
$
125,000

 
152,435

 
$
1,524

 
$
3,900,090

 
$
3,603

 
$
(2,367,073
)
 
$
1,663,144

 
$
(5,675
)
 
$
(1,716
)
 
$
1,655,753

Redemption of Aimco Operating Partnership Units

 

 

 

 

 

 

 

 
(6,963
)
 

 
(6,963
)
Amortization of share-based compensation cost

 

 
19

 

 
2,631

 

 

 
2,631

 
357

 

 
2,988

Effect in changes in ownership for consolidated entities

 

 

 

 
(17,486
)
 

 

 
(17,486
)
 
6,579

 

 
(10,907
)
Change in accumulated other comprehensive income

 

 

 

 

 
(59
)
 

 
(59
)
 
(3
)
 

 
(62
)
Other, net

 

 
114

 
1

 
92

 

 

 
93

 

 

 
93

Net income

 

 

 

 

 

 
83,792

 
83,792

 
3,755

 
6,206

 
93,753

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 
(7,245
)
 
(7,245
)
Cash dividends paid to Common Stock holders

 

 

 

 

 

 
(59,777
)
 
(59,777
)
 
(2,838
)
 

 
(62,615
)
Cash dividends paid to Preferred Stock holders

 

 

 

 

 

 
(2,148
)
 
(2,148
)
 

 

 
(2,148
)
Balances at March 31, 2018
5,000

 
$
125,000

 
152,568

 
$
1,525

 
$
3,885,327

 
$
3,544

 
$
(2,345,206
)
 
$
1,670,190

 
$
(4,788
)
 
$
(2,755
)
 
$
1,662,647

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balances at December 31, 2018
5,000

 
$
125,000

 
144,623

 
$
1,446

 
$
3,515,686

 
$
4,794

 
$
(1,947,507
)
 
$
1,699,419

 
$
67,189

 
$
(2,967
)
 
$
1,763,641

Repurchases of Common Stock

 

 
(461
)
 
(5
)
 
(20,677
)
 

 

 
(20,682
)
 

 

 
(20,682
)
Redemption of Aimco Operating Partnership Units

 

 

 

 

 

 

 

 
(2,557
)
 

 
(2,557
)
Amortization of share-based compensation cost

 

 
22

 

 
2,442

 

 

 
2,442

 
796

 

 
3,238

Effect in changes in ownership for consolidated entities

 

 

 

 
(2,168
)
 

 

 
(2,168
)
 
2,168

 

 

Change in accumulated other comprehensive income

 

 

 

 

 
57

 

 
57

 
4

 

 
61

Other, net

 

 
82

 
2

 
57

 

 

 
59

 

 
19

 
78

Net income

 

 

 

 

 

 
274,133

 
274,133

 
15,137

 
91

 
289,361

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 
(3,244
)
 

 
(3,244
)
Cash dividends paid to Common Stock holders

 

 

 

 

 

 
(67,476
)
 
(67,476
)
 

 

 
(67,476
)
Common Stock issued in special dividend

 

 
4,492

 
45

 
(45
)
 

 

 

 

 

 

Cash dividends paid to Preferred Stock holders

 

 

 

 

 

 
(2,148
)
 
(2,148
)
 

 

 
(2,148
)
Balances at March 31, 2019
5,000

 
$
125,000

 
148,758

 
$
1,488

 
$
3,495,295

 
$
4,851

 
$
(1,742,998
)
 
$
1,883,636

 
$
79,493

 
$
(2,857
)
 
$
1,960,272



See notes to condensed consolidated financial statements.
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Table of Contents

APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
Three Months Ended
 
March 31,
 
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
291,295

 
$
95,690

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
93,565

 
92,548

Gain on dispositions of real estate
(291,473
)
 
(53,195
)
Income tax expense (benefit)
2,981

 
(34,517
)
Other adjustments
3,201

 
284

Net changes in operating assets and operating liabilities
(17,952
)
 
(19,487
)
Net cash provided by operating activities
81,617

 
81,323

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Purchases of real estate and deposits related to purchases of real estate
(2,236
)
 
(164,650
)
Capital expenditures
(85,546
)
 
(75,601
)
Proceeds from dispositions of real estate
342,083

 
69,788

Purchases of corporate assets
(3,319
)
 
(947
)
Other investing activities
1,422

 
(218
)
Net cash provided by (used in) investing activities
252,404

 
(171,628
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from non-recourse property debt

 
360,613

Principal repayments of non-recourse property debt
(19,580
)
 
(206,262
)
Net (repayments of) borrowings on revolving credit facility
(90,360
)
 
11,475

Repurchases of Common Stock
(20,682
)
 

Payment of dividends to holders of Common Stock
(67,405
)
 
(59,652
)
Payment of dividends to holders of Preferred Stock
(2,148
)
 
(2,148
)
Payment of distributions to noncontrolling interests
(5,701
)
 
(11,902
)
Redemptions of noncontrolling interests in the Aimco Operating Partnership
(2,653
)
 
(7,122
)
Purchases and redemptions of noncontrolling interests

 
(1,219
)
Other financing activities
302

 
3,012

Net cash (used in) provided by financing activities
(208,227
)
 
86,795

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
125,794

 
(3,510
)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD
72,595

 
142,541

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD
$
198,389

 
$
139,031


See notes to condensed consolidated financial statements.
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Table of Contents

 
AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

 
March 31,
2019
 
December 31,
2018
ASSETS
 
 
 
Buildings and improvements
$
6,493,539

 
$
6,552,065

Land
1,731,980

 
1,756,525

Total real estate
8,225,519

 
8,308,590

Accumulated depreciation
(2,581,666
)
 
(2,585,115
)
Net real estate
5,643,853

 
5,723,475

Cash and cash equivalents
162,286

 
36,858

Restricted cash
36,103

 
35,737

Other assets
441,527

 
351,541

Assets held for sale

 
42,393

Total assets
$
6,283,769

 
$
6,190,004

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Non-recourse property debt, net
$
3,859,023

 
$
3,915,305

Revolving credit facility borrowings
70,000

 
160,360

Total indebtedness
3,929,023

 
4,075,665

Accrued liabilities and other
293,279

 
226,230

Liabilities related to assets held for sale

 
23,177

Total liabilities
4,222,302

 
4,325,072

Redeemable preferred units
101,195

 
101,291

Commitments and contingencies (Note 5)

 

Partners’ capital:
 
 
 
Preferred units
125,000

 
125,000

General Partner and Special Limited Partner
1,758,636

 
1,574,419

Limited Partners
79,493

 
67,189

Partners’ capital attributable to the Aimco Operating Partnership
1,963,129

 
1,766,608

Noncontrolling interests in consolidated real estate partnerships
(2,857
)
 
(2,967
)
Total partners’ capital
1,960,272

 
1,763,641

Total liabilities and partners’ capital
$
6,283,769

 
$
6,190,004


See notes to condensed consolidated financial statements.
8


Table of Contents

AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
(Unaudited)

 
Three Months Ended
 
March 31,
 
2019
 
2018
REVENUES
 
 
 
Rental and other property revenues attributable to real estate
$
230,235

 
$
225,393

Asset Management business rental and tax credit revenues

 
22,327

Total revenues
230,235

 
247,720

 
 
 
 
OPERATING EXPENSES
 
 
 
Property operating expenses attributable to real estate
79,184

 
78,287

Property operating expenses of partnerships served by Asset Management business

 
9,195

Depreciation and amortization
93,565

 
92,548

General and administrative expenses
10,369

 
11,355

Other expenses, net
5,703

 
2,958

Total operating expenses
188,821

 
194,343

 
 
 
 
Interest income
2,726

 
2,172

Interest expense
(41,409
)
 
(47,795
)
Gain on dispositions of real estate
291,473

 
53,195

Other, net
72

 
224

Income before income tax (expense) benefit
294,276

 
61,173

Income tax (expense) benefit
(2,981
)
 
34,517

Net income
291,295

 
95,690

Net income attributable to noncontrolling interests in consolidated real estate partnerships
(91
)
 
(6,206
)
Net income attributable to the Aimco Operating Partnership
291,204

 
89,484

Net income attributable to the Aimco Operating Partnership’s preferred unitholders
(4,082
)
 
(4,085
)
Net income attributable to participating securities
(483
)
 
(125
)
Net income attributable to the Aimco Operating Partnership’s common unitholders
$
286,639

 
$
85,274

 
 
 
 
Net income attributable to the Aimco Operating Partnership per common unit – basic and diluted
$
1.88

 
$
0.54

 
 
 
 
Weighted average common units outstanding – basic
152,303

 
158,875

Weighted average common units outstanding – diluted
152,632

 
159,006

 

See notes to condensed consolidated financial statements.
9


Table of Contents

AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)

 
Three Months Ended
 
March 31,
 
2019
 
2018
Net income
$
291,295

 
$
95,690

Other comprehensive gain (loss):
 
 
 
Unrealized gains (losses) on available for sale debt securities
61

 
(600
)
Unrealized gains on interest rate swaps

 
419

Losses on interest rate swaps reclassified into earnings from accumulated other comprehensive loss

 
119

Other comprehensive gain (loss)
61

 
(62
)
Comprehensive income
291,356

 
95,628

Comprehensive income attributable to noncontrolling interests
(91
)
 
(6,206
)
Comprehensive income attributable to the Aimco Operating Partnership
$
291,265

 
$
89,422



See notes to condensed consolidated financial statements.
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AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
(In thousands)
(Unaudited)


 
Preferred
Units
 
General Partner
and Special
Limited Partner
 
Limited Partners
 
Partners’ capital attributable to the Aimco Operating Partnership
 
Noncontrolling interests
 
Total Partners’ capital
Balances at December 31, 2017
$
125,000

 
$
1,538,144

 
$
(5,675
)
 
$
1,657,469

 
$
(1,716
)
 
$
1,655,753

Redemption of partnership units held by non-Aimco partners

 

 
(6,963
)
 
(6,963
)
 

 
(6,963
)
Amortization of share-based compensation

 
2,631

 
357

 
2,988

 

 
2,988

Effect of changes in ownership for consolidated entities

 
(17,486
)
 
6,579

 
(10,907
)
 

 
(10,907
)
Change in accumulated other comprehensive income

 
(59
)
 
(3
)
 
(62
)
 

 
(62
)
Other, net

 
93

 

 
93

 

 
93

Net income

 
83,792

 
3,755

 
87,547

 
6,206

 
93,753

Distributions to noncontrolling interests

 

 

 

 
(7,245
)
 
(7,245
)
Distributions to common unitholders

 
(59,777
)
 
(2,838
)
 
(62,615
)
 

 
(62,615
)
Distributions to preferred unitholders

 
(2,148
)
 

 
(2,148
)
 

 
(2,148
)
Balances at March 31, 2018
$
125,000


$
1,545,190

 
$
(4,788
)
 
$
1,665,402

 
$
(2,755
)
 
$
1,662,647

 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
$
125,000

 
$
1,574,419

 
$
67,189

 
$
1,766,608

 
$
(2,967
)
 
$
1,763,641

Repurchases of common partnership units

 
(20,682
)
 

 
(20,682
)
 

 
(20,682
)
Redemption of partnership units held by non-Aimco partners

 

 
(2,557
)
 
(2,557
)
 

 
(2,557
)
Amortization of share-based compensation

 
2,442

 
796

 
3,238

 

 
3,238

Effect of changes in ownership for consolidated entities

 
(2,168
)
 
2,168

 

 

 

Change in accumulated other comprehensive income

 
57

 
4

 
61

 

 
61

Other, net

 
59

 

 
59

 
19

 
78

Net income

 
274,133

 
15,137

 
289,270

 
91

 
289,361

Distributions to common unitholders

 
(67,476
)
 
(3,244
)
 
(70,720
)
 

 
(70,720
)
Distributions to preferred unitholders

 
(2,148
)
 

 
(2,148
)
 

 
(2,148
)
Balances at March 31, 2019
$
125,000

 
$
1,758,636

 
$
79,493

 
$
1,963,129

 
$
(2,857
)
 
$
1,960,272


See notes to condensed consolidated financial statements.
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AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
Three Months Ended
 
March 31,
 
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
291,295

 
$
95,690

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
93,565

 
92,548

Gain on dispositions of real estate
(291,473
)
 
(53,195
)
Income tax expense (benefit)
2,981

 
(34,517
)
Other adjustments
3,201

 
284

Net changes in operating assets and operating liabilities
(17,952
)
 
(19,487
)
Net cash provided by operating activities
81,617

 
81,323

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Purchases of real estate and deposits related to purchases of real estate
(2,236
)
 
(164,650
)
Capital expenditures
(85,546
)
 
(75,601
)
Proceeds from dispositions of real estate
342,083

 
69,788

Purchases of corporate assets
(3,319
)
 
(947
)
Other investing activities
1,422

 
(218
)
Net cash provided by (used in) investing activities
252,404

 
(171,628
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from non-recourse property debt

 
360,613

Principal repayments of non-recourse property debt
(19,580
)
 
(206,262
)
Net (repayments of) borrowings on revolving credit facility
(90,360
)
 
11,475

Repurchases of common partnership units held by General Partner and Special Limited Partner
(20,682
)
 

Payment of distributions to holders of Preferred Units
(4,082
)
 
(4,085
)
Payment of distributions to General Partner and Special Limited Partner
(67,405
)
 
(59,652
)
Payment of distributions to Limited Partners
(3,767
)
 
(2,737
)
Payment of distributions to noncontrolling interests

 
(7,228
)
Purchases and redemptions of noncontrolling interests in the Aimco Operating Partnership
(2,653
)
 
(7,122
)
Purchases of noncontrolling interests in consolidated real estate partnerships

 
(1,219
)
Other financing activities
302

 
3,012

Net cash (used in) provided by financing activities
(208,227
)
 
86,795

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
125,794

 
(3,510
)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD
72,595

 
142,541

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD
$
198,389

 
$
139,031


See notes to condensed consolidated financial statements.
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APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

Note 1 — Organization
Apartment Investment and Management Company, or Aimco, is a Maryland corporation incorporated on January 10, 1994. Aimco is a self-administered and self-managed real estate investment trust, or REIT. AIMCO Properties, L.P., or the Aimco Operating Partnership, is a Delaware limited partnership formed on May 16, 1994, to conduct our business, which is focused on the ownership, management, redevelopment and some development of quality apartment communities located in several of the largest markets in the United States.
Aimco, through its wholly-owned subsidiaries, AIMCO-GP, Inc. and AIMCO-LP Trust, owns a majority of the ownership interests in the Aimco Operating Partnership. Aimco conducts all of its business and owns all of its assets through the Aimco Operating Partnership. Interests in the Aimco Operating Partnership that are held by limited partners other than Aimco are referred to as OP Units. OP Units include common partnership units, which we refer to as common OP Units, as well as partnership preferred units, which we refer to as preferred OP Units. As of March 31, 2019, after eliminations for units held by consolidated subsidiaries, the Aimco Operating Partnership had 158,435,979 common partnership units outstanding. As of March 31, 2019, Aimco owned 148,758,031 of the common partnership units (93.9% of the common partnership units) of the Aimco Operating Partnership and Aimco had outstanding an equal number of shares of its Class A Common Stock, which we refer to as Common Stock.
Except as the context otherwise requires, “we,” “our” and “us” refer to Aimco, the Aimco Operating Partnership and their consolidated subsidiaries, collectively.
As of March 31, 2019, we owned an equity interest in 128 apartment communities with 34,349 apartment homes in our portfolio. Our portfolio is diversified by both price point and geography and consists primarily of market rate apartment communities in which we own a substantial interest. We consolidated 124 of these apartment communities with 34,207 apartment homes and these communities comprise our segments.
Note 2 — Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2019, are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.
The balance sheets of Aimco and the Aimco Operating Partnership at December 31, 2018, have been derived from their respective audited financial statements at that date, but do not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the financial statements and notes thereto included in Aimco’s and the Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2018. Except where indicated, the footnotes refer to both Aimco and the Aimco Operating Partnership.
Principles of Consolidation
Aimco’s accompanying condensed consolidated financial statements include the accounts of Aimco, the Aimco Operating Partnership, and their consolidated subsidiaries. The Aimco Operating Partnership’s condensed consolidated financial statements include the accounts of the Aimco Operating Partnership and its consolidated subsidiaries (see Note 9). All significant intercompany balances and transactions have been eliminated in consolidation.
Interests in the Aimco Operating Partnership that are held by limited partners other than Aimco are reflected in Aimco’s accompanying condensed consolidated balance sheets as noncontrolling interests in the Aimco Operating Partnership. Interests in partnerships consolidated by the Aimco Operating Partnership that are held by third parties are reflected in our accompanying condensed consolidated balance sheets as noncontrolling interests in consolidated real estate partnerships.

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Temporary Equity and Partners’ Capital
The following table presents a reconciliation of the Aimco Operating Partnership’s preferred OP Units from December 31, 2018 to March 31, 2019. The preferred OP Units may be redeemed at the holders’ option (as further discussed in Note 6), and are therefore presented within temporary equity in Aimco’s condensed consolidated balance sheets and within temporary capital in the Aimco Operating Partnership’s condensed consolidated balance sheets (in thousands).
Balance, December 31, 2018
$
101,291

Distributions to holders of preferred OP Units
(1,934
)
Redemption of preferred OP Units and other
(96
)
Net income attributable to preferred OP Units
1,934

Balance, March 31, 2019
$
101,195

Use of Estimates
The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts included in the financial statements and accompanying notes thereto. Actual results could differ from those estimates.
Reclassifications and Revisions
Certain items in the 2018 condensed consolidated financial statements have been reclassified to conform to the current presentation. We have also reclassified gain on dispositions of real estate and related income taxes, which were previously reported net on our condensed consolidated statements of operations, to now present gain on dispositions of real estate as a component of income before income taxes in our condensed consolidated statements of operations, as follows (in thousands):
 
March 31, 2018
 
As Previously Reported
 
Adjustments
 
As Revised
Income tax benefit
$
37,388

 
$
(2,871
)
 
$
34,517

Gain on dispositions of real estate
50,324

 
2,871

 
53,195

During the three months ended March 31, 2019, Aimco and the Aimco Operating Partnership effected a reverse split of share of common shares and common partnership units, respectively, at a ratio of 1 share or unit for every 1.03119 shares or units outstanding on the date of effectiveness. The accounting guidance for recapitalization events requires that we revise Aimco’s equity and the Aimco Operating Partnership’s partners’ capital as if the reverse split had occurred at the beginning of the earliest period presented. As such, we have revised the outstanding share and unit counts, presentation of share and unit activity, and earnings per share and unit, as if the reverse split had occurred on December 31, 2017.
Accounting Pronouncements Adopted in the Current Year
Effective January 1, 2019, we adopted the lease accounting standard issued by the Financial Accounting Standards Board, or FASB. We elected to adopt the new standard using practical expedients that: do not require a look back to expired or existing contracts for embedded leases; allow us to retain the classification of existing leases; and allow us to retain the previous accounting for the initial direct costs of existing leases. Under the new standard, a contract is or contains a lease when it provides the right to control the use of an asset for a period of time in exchange for consideration.
Lessor accounting remains largely unchanged. In our position as a lessor, we have elected the practical expedient that allows us to combine revenue attributable to nonlease components with associated lease components where the timing and pattern of transfer of the components are the same. As a result, we will combine rent payments with payments for other services we provide to our residents, including residents’ reimbursement of utility expenses. We have adopted the standard using the optional transition method that allows for prior reporting periods to remain as originally presented. Please refer to Note 4.
In 2018, the Securities Exchange Commission, or SEC, amended its rules to eliminate, modify, or integrate into other SEC requirements certain disclosure rules. The amendments are intended to simplify compliance without significantly changing the total mix of information provided to investors. The amendments created a requirement to report changes in equity and dividends per share in interim periods on a comparative basis for both quarter-to-date and year-to-date periods presented. We have presented

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comparative interim statements of stockholders’ and partners’ equity in our condensed consolidated financial statements for the three months ended March 31, 2019 and 2018.
Recent Accounting Pronouncements
In June 2016, the FASB issued a new standard for accounting for financial instruments and credit losses thereon, which changes the method and timing of the recognition of credit losses on financial assets. The standard will require us to estimate and record credit losses over the life of a receivable at its inception. We have limited loans receivable and we invest in debt securities, which are subject to the new standard. Receivables related to operating leases are excluded from the new standard as they are subject to the lease accounting standard. This standard is required to be applied using a modified-retrospective approach and requires a cumulative-effect adjustment to retained earnings be recorded as of the date of adoption. The new standard is effective for us on January 1, 2020. We are currently in the process of completing our analysis of the impact of the standard and do not expect it to have a material effect on our financial position or results of operations.
Note 3 — Significant Transactions
Dispositions of Apartment Communities
During the three months ended March 31, 2019, we sold apartment communities as summarized below (dollars in thousands):
Apartment communities sold
7

Apartment homes sold
2,206

Gain on dispositions of real estate
$
291,473

The apartment communities sold were predominantly located outside of our primary markets or in lower-rated locations within our primary markets, and had average revenues per apartment home significantly below those of our retained portfolio.
In addition to the apartment communities we sold during the current period, from time to time we may be marketing for sale certain apartment communities that are inconsistent with our long-term investment strategy. At the end of each reporting period, we evaluate whether such communities meet the criteria to be classified as held for sale. As of March 31, 2019, no apartment communities were classified as held for sale.
Note 4 — Leases
The majority of payments that we receive for our residential and commercial leases are fixed. We receive variable payments from our residents and commercial tenants primarily for utility and other expense reimbursements. For the three months ended March 31, 2019, our total lease income was comprised of the following amounts for all operating leases (in thousands):
Fixed lease income
$
215,581

Variable lease income
14,144

Total lease income
$
229,725

In general, our leases have options to extend for a certain period of time at the lessee’s option. Future minimum annual rental payments we will receive under commercial operating leases are as follows (in thousands). We do not include our residential operating leases due to their shorter duration.
April 1, 2019 to December 31, 2019
$
13,431

2020
16,103

2021
13,736

2022
13,246

2023
12,394

Thereafter
57,942

Total
$
126,852

Beginning in 2019, we are required to recognize right of use assets and related lease liabilities on our consolidated balance sheets when we are the lessee. Upon adoption of the standard, we recognized right of use assets of $87.5 million, which is presented in the Other assets line item on our condensed consolidated balance sheets, net of accumulated amortization. We also recognized

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the related lease liabilities of $79.7 million, which are presented in the Accrued liabilities and other line item on our condensed consolidated balance sheets. We estimated the value of the lease liabilities using a discount rate equivalent to an incremental borrowing rate, or the rate Aimco would pay on a secured borrowing with similar terms to the lease, based on Aimco’s borrowing profile and the term of the underlying lease.
Substantially all of the payments under our ground and office leases are fixed. Rents for extension periods, when provided for in the lease, are generally determined based on a fair value factor at the time the option is exercised; therefore, these extension periods are not included in our determination of the right of use asset and lease liability. For the three months ended March 31, 2019, our total lease cost for ground and office leases was $3.2 million and $0.7 million, respectively.
The ground and office leases have weighted average remaining terms of 79.4 years and 9.5 years, respectively, and weighted average discount rates of 4.12% and 3.65%, respectively. Minimum annual rental payments under operating leases, reconciled to the lease liabilities recognized on our condensed consolidated balance sheets are as follows (in thousands):
 
Office Lease Obligations
 
Ground Lease Obligations
 
Total Operating Lease Obligations
April 1, 2019 to December 31, 2019
$
1,957

 
$
1,586

 
$
3,543

2020
2,806

 
2,350

 
5,156

2021
2,704

 
2,439

 
5,143

2022
2,561

 
2,492

 
5,053

2023
1,871

 
2,492

 
4,363

Thereafter
10,644

 
422,169

 
432,813

Total
$
22,543

 
$
433,528

 
$
456,071

Less: Discount
(17,891
)
 
(357,386
)
 
 
Total lease liability
$
4,652

 
$
76,142

 
 
Note 5 — Commitments and Contingencies
Commitments
In connection with our redevelopment, development and capital improvement activities, we have entered into various construction-related contracts and we have made commitments to complete redevelopment and development of certain apartment communities, pursuant to financing or other arrangements. As of March 31, 2019, our commitments related to these capital activities totaled approximately $184.7 million, most of which we expect to incur during the next 12 months.
We enter into certain commitments for future purchases of goods and services in connection with the operations of our apartment communities. Those commitments generally have terms of one year or less and reflect expenditure levels comparable to our historical expenditures.
Income Taxes
In 2014, the Internal Revenue Service initiated an audit of the Aimco Operating Partnership’s 2011 and 2012 tax years. We do not believe the audit will have any material effect on our unrecognized tax benefits, financial condition or results of operations.
Legal Matters
In addition to the matters described below, we are a party to various legal actions and administrative proceedings arising in the ordinary course of business, some of which are covered by our general liability insurance program, and none of which we expect to have a material adverse effect on our consolidated financial condition, results of operations or cash flows.
Environmental
Various federal, state and local laws subject apartment community owners or operators to liability for management, and the costs of removal or remediation, of certain potentially hazardous materials that may be present in the land or buildings of an apartment community. Such laws often impose liability without regard to fault or whether the owner or operator knew of, or was responsible for, the presence of such materials. The presence of, or the failure to manage or remediate properly, these materials may adversely affect occupancy at such apartment communities as well as the ability to sell or finance such apartment communities. In addition, governmental agencies may bring claims for costs associated with investigation and remediation actions. Moreover,

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private plaintiffs may potentially make claims for investigation and remediation costs they incur or for personal injury, disease, disability or other infirmities related to the alleged presence of hazardous materials. In addition to potential environmental liabilities or costs associated with our current apartment communities, we may also be responsible for such liabilities or costs associated with communities we acquire or manage in the future, or apartment communities we no longer own or operate.
We are engaged in discussions with the Environmental Protection Agency, or EPA, and the Indiana Department of Environmental Management, or IDEM, regarding contaminated groundwater near an Indiana apartment community that has not been owned by us since 2008. The contamination allegedly derives from a dry cleaner that operated on our former property, prior to our ownership. We undertook a voluntary remediation of the dry cleaner contamination under IDEM’s oversight. In 2016, EPA listed our former community and a number of residential communities in the vicinity on the National Priorities List, or NPL (i.e. as a Superfund site). In May 2018, we prevailed on our federal judicial appeal vacating the Superfund listing. We continue to work with EPA and IDEM to identify options for clean-up of the site. Although the outcome of these processes are uncertain, we do not expect their resolution to have a material adverse effect on our consolidated financial condition, results of operations or cash flows.
We also have a contingent liability stemming from a property in Lake Tahoe, California, regarding environmental contamination from the historic operation of a dry cleaner. An entity owned by us was the former general partner of a now-dissolved partnership that previously owned a site that was used for dry cleaning. That entity and the current property owner have been remediating the dry cleaner site since 2009, under the oversight of the Lahontan Regional Water Quality Control Board, or Lahontan. In May 2017, Lahontan issued a final cleanup and abatement order that names four potentially-responsible parties, acknowledges that there may be additional responsible parties, and requires the named parties to perform additional groundwater investigation and corrective actions with respect to onsite and offsite contamination. We are appealing the final order while simultaneously complying with it. Although the outcome of this process is uncertain, we do not expect its resolution to have a material adverse effect on our consolidated financial condition, results of operations or cash flows.
We have determined that our legal obligations to remove or remediate certain potentially hazardous materials may be conditional asset retirement obligations, as defined in GAAP. Except in limited circumstances where the asset retirement activities are expected to be performed in connection with a planned construction project or apartment community casualty, we believe that the fair value of our asset retirement obligations cannot be reasonably estimated due to significant uncertainties in the timing and manner of settlement of those obligations. Asset retirement obligations that are reasonably estimable as of March 31, 2019, are immaterial to our consolidated financial condition, results of operations and cash flows.
Note 6 — Earnings and Dividends per Share and Unit
Aimco and the Aimco Operating Partnership calculate basic earnings per common share and basic earnings per common unit based on the weighted average number of shares of Common Stock and common partnership units and participating securities outstanding, and calculate diluted earnings per share and diluted earnings per unit taking into consideration dilutive common stock and common partnership unit equivalents and dilutive convertible securities outstanding during the period.
Our common stock and common partnership unit equivalents include options to purchase shares of Common Stock, which, if exercised, would result in Aimco’s issuance of additional shares and the Aimco Operating Partnership’s issuance to Aimco of additional common partnership units equal to the number of shares purchased under the options. These equivalents also include unvested total stockholder return, or TSR, restricted stock awards that do not meet the definition of participating securities, which would result in an increase in the number of shares of Common Stock and common partnership units outstanding equal to the number of shares that vest. The dilutive effect of these securities was 0.2 million and 0.1 million shares and 0.3 million and 0.1 million units for the three months ended March 31, 2019 and 2018, respectively. Securities with dilutive effect are included in the denominator for calculating diluted earnings per share and per unit during these periods. There were no shares and 0.2 million potential shares, and 0.4 million and 0.2 million potential units not dilutive and excluded from the denominator for calculating diluted earnings per share and per unit, respectively, for both the three months ended March 31, 2019 and 2018.
Our time-based restricted stock awards receive dividends similar to shares of Common Stock and common partnership units prior to vesting, and our TSR long-term incentive partnership units receive a percentage of the distributions paid to common partnership units prior to vesting. These dividends and distributions are not forfeited if the awards fail to vest. Therefore, the unvested shares and units related to these awards are participating securities. The effect of participating securities is included in basic and diluted earnings per share and unit computations using the two-class method of allocating distributed and undistributed earnings when the two-class method is more dilutive than the treasury method. There were 0.2 million and 0.3 million unvested restricted participating shares and 0.2 million and 0.3 million unvested restricted participating units, for the three months ended March 31, 2019 and 2018, respectively.

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The Aimco Operating Partnership has various classes of preferred OP Units, which may be redeemed at the holders’ option. The Aimco Operating Partnership may redeem these units for cash, or at its option, shares of Common Stock. As of March 31, 2019, these preferred OP Units were potentially redeemable for approximately 2.0 million shares of Common Stock (based on the period end market price), or cash. The Aimco Operating Partnership has a redemption policy that requires cash settlement of redemption requests for the preferred OP Units, subject to limited exceptions. Accordingly, we have excluded these securities from earnings per share and unit computations and we expect to exclude them in future periods.
During the three months ended March 31, 2019 and 2018, we paid $2.02 and $0.38, respectively, in dividends and distributions per share and per unit. The $2.02 paid during the three months ended March 31, 2019 represents the per share and unit value of the special dividend and special distribution. The special dividend consisted of $67.1 million in cash, 4.5 million shares of Common Stock and $0.4 million of cash in paid lieu of issuing fractional shares. The special distribution consisted of $72.7 million in cash, 4.8 million common partnership units and $0.4 million of cash paid in lieu of issuing fractional units.
Note 7 — Fair Value Measurements
Recurring Fair Value Measurements
We measure at fair value on a recurring basis our investments in the securitization trust that holds certain of our property debt, which we classify as available for sale, or AFS, debt securities.
These investments are included in Other assets in the accompanying condensed consolidated balance sheets. We hold several positions in the securitization trust that pay interest currently and we also hold the first loss position in the securitization trust, which accrues interest over the term of the investment. These investments were acquired at a discount to face value and we are accreting the discount to the $100.9 million face value of the investments through interest income using the effective interest method over the remaining expected term of the investments, which, as of March 31, 2019, was approximately 2.2 years. Our amortized cost basis for these investments, which represents the original cost adjusted for interest accretion less interest payments received, was $85.1 million and $83.6 million at March 31, 2019 and December 31, 2018, respectively. We estimated the fair value of these investments to be $90.1 million and $88.5 million at March 31, 2019 and December 31, 2018, respectively.
Our investments in AFS debt securities are classified within Level 2 of the GAAP fair value hierarchy. We estimate the fair value of these investments using an income and market approach with primarily observable inputs, including yields and other information regarding similar types of investments, and adjusted for certain unobservable inputs specific to these investments. The fair value of the positions that pay interest currently typically moves in an inverse relationship with movements in interest rates. The fair value of the first loss position is primarily correlated to collateral quality and demand for similar subordinate commercial mortgage-backed securities.
Fair Value Disclosures
We believe that the carrying value of the consolidated amounts of cash and cash equivalents, receivables and payables approximated their fair value at March 31, 2019, and December 31, 2018, due to their relatively short-term nature and high probability of realization. The carrying amounts of longer term seller financing notes receivable approximated their estimated fair value at March 31, 2019 and December 31, 2018. The carrying amount of our total indebtedness approximated its estimated fair value at March 31, 2019 and December 31, 2018. We estimate the fair value of our seller financing notes and our consolidated debt using an income and market approach, including comparison of the contractual terms to observable and unobservable inputs such as market interest rate risk spreads, contractual interest rates, remaining periods to maturity, collateral quality and loan to value ratios on similarly encumbered apartment communities within our portfolio. We classify the fair value of debt and seller financing notes within Level 3 of the GAAP valuation hierarchy based on the significance of certain of the unobservable inputs used to estimate its fair value.
Note 8 — Business Segments
During the three months ended March 31, 2019, as a result of the 2018 sale of the Asset Management business, we revised the information regularly reviewed by our chief executive officer, who is our chief operating decision maker, to assess our operating performance. We have determined we have four segments: Same Store, Redevelopment and Development, Acquisition, and Other Real Estate.

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Our Same Store segment includes communities that have reached a stabilized level of operations as of the beginning of a two-year comparable period and maintained it throughout the current and comparable prior year, and are not expected to be sold within 12 months. Our Redevelopment and Development segment includes apartment communities that are currently under construction that have not achieved a stabilized level of operations, and those that have been completed in recent years that have not achieved and maintained stabilized operations for both the current and comparable prior year. Our Acquisition segment includes apartment communities that we have acquired since the beginning of a two-year comparable period. Our Other Real Estate segment primarily includes apartment communities that are subject to limitations on rent increases and communities that we expect to sell within 12 months but do not yet meet the criteria to be classified as held for sale.
Our chief operating decision maker uses proportionate property net operating income to assess the operating performance of our apartment communities. Proportionate property net operating income is defined as our share of rental and other property revenue less our share of property operating expenses for consolidated apartment communities. We exclude from rental and other property revenues the amount of utility costs reimbursed by residents and reflect such amount as a reduction of the related utility expense within property operating expenses in our evaluation of segment results. In our condensed consolidated statements of operations, utility reimbursements are included in rental and other property revenues, in accordance with GAAP.
As of March 31, 2019, our Same-Store segment included 96 consolidated apartment communities with 28,039 apartment homes; our Redevelopment and Development segment included seven consolidated apartment communities with 3,373 apartment homes; our Acquisition segment included six consolidated apartment communities with 1,480 apartment homes; and our Other Real Estate segment included 15 apartment communities with 1,315 apartment homes.
The following tables present the revenues, proportionate property net operating income and income before income tax (expense) benefit of our segments on a proportionate basis and excluding our proportionate share of four communities with 142 apartment homes, which we do not consolidate, and amounts related to apartment communities sold as of March 31, 2019 for the three months ended March 31, 2019 and 2018 (in thousands):
 
Same Store
 
Redevelopment and Development
 
Acquisition
 
Other Real Estate
 
Proportionate and Other
Adjustments (1)
 
Corporate and
Amounts Not
Allocated to
Segments (2)
 
Consolidated
Three months ended March 31, 2019:
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$
175,719

 
$
20,350

 
$
9,993

 
$
9,467

 
$
8,747

 
$
5,959

 
$
230,235

Property operating expenses attributable to real estate
47,137

 
7,290

 
2,855

 
3,883

 
8,189

 
9,830

 
79,184

Other operating expenses not allocated to segments (3)

 

 

 

 

 
109,637

 
109,637

Total operating expenses
47,137

 
7,290

 
2,855

 
3,883

 
8,189

 
119,467

 
188,821

Proportionate property net operating income
128,582

 
13,060

 
7,138

 
5,584

 
558

 
(113,508
)
 
41,414

Other items included in income before income tax expense (4)

 

 

 

 

 
252,862

 
252,862

Income before income tax expense
$
128,582

 
$
13,060

 
$
7,138

 
$
5,584

 
$
558

 
$
139,354

 
$
294,276


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Same Store
 
Redevelopment and Development
 
Acquisition
 
Other Real Estate
 
Proportionate and Other
Adjustments (1)
 
Corporate and
Amounts Not
Allocated to Segments (2)
 
Consolidated
Three months ended March 31, 2018:
 
 
 
 
 
 
 
 
 
 
 
 
Rental and other property revenues attributable to real estate
$
168,606

 
$
18,077

 
$
1,580

 
$
9,312

 
$
8,236

 
$
19,582

 
$
225,393

Asset Management business rental and tax credit revenues

 

 

 

 

 
22,327

 
22,327

Total revenues
168,606

 
18,077

 
1,580

 
9,312

 
8,236

 
41,909

 
247,720

Property operating expenses attributable to real estate
46,755

 
6,499

 
523

 
3,839

 
7,726

 
12,945

 
78,287

Property operating expenses of partnerships served by Asset Management business

 

 

 

 

 
9,195

 
9,195

Other operating expenses not allocated to segments (3)

 

 

 

 

 
106,861

 
106,861

Total operating expenses
46,755

 
6,499

 
523

 
3,839

 
7,726

 
129,001

 
194,343

Proportionate property net operating income
121,851

 
11,578

 
1,057

 
5,473

 
510

 
(87,092
)
 
53,377

Other items included in income before income tax benefit (4)

 

 

 

 

 
7,796

 
7,796

Income before income tax benefit
$
121,851

 
$
11,578

 
$
1,057

 
$
5,473

 
$
510

 
$
(79,296
)
 
$
61,173

(1)
Represents adjustments for the noncontrolling interests in consolidated real estate partnerships’ share of the results of consolidated apartment communities in our segments, which are included in the related consolidated amounts, but excluded from proportionate property net operating income for our segment evaluation. Also includes the reclassification of utility reimbursements from revenues to property operating expenses for the purpose of evaluating segment results. Utility reimbursements are included in rental and other property revenues in our condensed consolidated statements of operations prepared in accordance with GAAP.
(2)
Includes the operating results of apartment communities sold during the periods shown or held for sale at the end of the period, if any, and the operating results of apartment communities owned by consolidated partnerships served by our Asset Management business prior to its sale in July 2018. Corporate and Amounts Not Allocated to Segments also includes property management expenses and casualty gains and losses, which are included in consolidated property operating expenses and are not part of our segment performance measure.
(3)
Other operating expenses not allocated to segments consists of depreciation and amortization, general and administrative expenses and other operating expenses, which are not included in our measure of segment performance.
(4)
Other items included in income before income tax (expense) benefit primarily consists of gain on dispositions of real estate and interest expense.
The assets of our segments and the consolidated assets not allocated to our segments were as follows (in thousands):
 
March 31, 2019
 
December 31, 2018
Same Store
$
4,148,435

 
$
4,148,787

Redevelopment and Development
822,348

 
792,126

Acquisition
546,467

 
507,190

Other Real Estate
326,241

 
327,099

Corporate and other assets (1)
440,278

 
414,802

Total consolidated assets
$
6,283,769

 
$
6,190,004

(1)
Includes the assets not allocated to our segments, primarily corporate assets and assets of apartment communities sold as of March 31, 2019.

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For the three months ended March 31, 2019 and 2018, capital additions related to our segments were as follows (in thousands):
 
Three Months Ended March 31,
 
2019
 
2018
Same Store
$
30,211

 
$
27,522

Redevelopment and Development
39,048

 
43,481

Acquisition
3,868

 
483

Other Real Estate
2,771

 
2,141

Total capital additions
$
75,898

 
$
73,627

Note 9 — Variable Interest Entities
Generally, a variable interest entity, or VIE, is a legal entity in which the equity investors do not have the characteristics of a controlling financial interest or the equity investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. A limited partnership is considered a VIE when the majority of the limited partners unrelated to the general partner possess neither the right to remove the general partner without cause, nor certain rights to participate in the decisions that most significantly affect the financial results of the partnership. In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; and the similarity with and significance to our business activities and the business activities of the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.
Aimco consolidates the Aimco Operating Partnership, which is a VIE for which Aimco is the primary beneficiary. Aimco, through the Aimco Operating Partnership, consolidates all VIEs for which the Aimco Operating Partnership is the primary beneficiary.
All of the VIEs the Aimco Operating Partnership consolidates own interests in one or more apartment communities and are typically structured to generate a return for their partners through the operation and ultimate sale of the communities. The Aimco Operating Partnership is the primary beneficiary in the limited partnerships in which it is the sole decision maker and has a substantial economic interest. The table below summarizes information regarding VIEs consolidated by the Aimco Operating Partnership:
 
March 31, 2019
 
December 31, 2018
VIEs with interests in apartment communities
9

 
9

Apartment communities owned by VIEs
9

 
9

Apartment homes in communities owned by VIEs
3,592

 
3,592

Assets of the Aimco Operating Partnership’s consolidated VIEs must first be used to settle the liabilities of such consolidated VIEs. These consolidated VIEs’ creditors do not have recourse to the general credit of the Aimco Operating Partnership. Assets and liabilities of consolidated VIEs are summarized in the table below (in thousands):
 
March 31, 2019
 
December 31, 2018
Assets
 
 
 
Net real estate
$
494,193

 
$
488,127

Cash and cash equivalents
17,508

 
15,416

Restricted cash
4,868

 
4,461

Other assets
28,500

 
3,973

Liabilities
 
 
 
Non-recourse property debt secured by Aimco communities, net
320,995

 
322,685

Accrued liabilities and other
39,639

 
13,576



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ITEM 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Quarterly Report contains or may contain information that is forward-looking, within the meaning of the federal securities laws, including, without limitation, statements regarding: our ability to maintain current or meet projected occupancy, rental rate and property operating results; the effect of acquisitions, dispositions, redevelopments and developments; our ability to meet budgeted costs and timelines, and achieve budgeted rental rates related to our redevelopment and development investments; expectations regarding sales of our apartment communities and the use of proceeds thereof; and our ability to comply with debt covenants, including financial coverage ratios.
Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond our control, including, without limitation:
Real estate and operating risks, including fluctuations in real estate values and the general economic climate in the markets in which we operate and competition for residents in such markets; national and local economic conditions, including the pace of job growth and the level of unemployment; the amount, location and quality of competitive new housing supply; the timing of acquisitions, dispositions, redevelopments and developments; and changes in operating costs, including energy costs;
Financing risks, including the availability and cost of capital markets’ financing; the risk that our cash flows from operations may be insufficient to meet required payments of principal and interest; and the risk that our earnings may not be sufficient to maintain compliance with debt covenants;
Insurance risks, including the cost of insurance, natural disasters and severe weather such as hurricanes; and
Legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of governmental regulations that affect us and interpretations of those regulations; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of apartment communities presently or previously owned by us.
In addition, our current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code and depends on our ability to meet the various requirements imposed by the Internal Revenue Code, through actual operating results, distribution levels and diversity of stock ownership.
Readers should carefully review our financial statements and the notes thereto, as well as the section entitled “Risk Factors” described in Item 1A of Apartment Investment and Management Company’s and AIMCO Properties, L.P.’s combined Annual Report on Form 10-K for the year ended December 31, 2018, and the other documents we file from time to time with the Securities and Exchange Commission.
As used herein and except as the context otherwise requires, “we,” “our” and “us” refer to Apartment Investment and Management Company (which we refer to as Aimco), AIMCO Properties, L.P. (which we refer to as the Aimco Operating Partnership) and their consolidated entities, collectively.
Certain financial and operating measures found herein and used by management are not defined under accounting principles generally accepted in the United States, or GAAP. These measures are defined and reconciled to the most comparable GAAP measures under the Non-GAAP Measures heading and include: Nareit Funds From Operations, Pro forma Funds From Operations, Adjusted Funds From Operations, Free Cash Flow, Economic Income, and the measures used to compute our leverage ratios.
Executive Overview
We are focused on the ownership, management, redevelopment and some development of quality apartment communities located in several of the largest markets in the United States.
Our principal financial objective is to provide predictable and attractive returns to our equity holders. We measure our long-term total return using Economic Income, defined as Net Asset Value, or NAV, growth plus dividends. NAV is used by many investors because the value of company assets can be readily estimated, even for non-earning assets such as land or properties under development. NAV has the advantage of incorporating the investment decisions of thousands of real estate investors, enhancing comparability among companies that have differences in their accounting, avoiding disparity that can result from application of GAAP to investment properties and various ownership structures. Some investors focus on multiples of Adjusted Funds From Operations, or AFFO, and Funds From Operations, or FFO. Our disclosure of AFFO, a measure of current return,

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complements our focus on Economic Income. We also use Pro forma Funds From Operations, or Pro forma FFO, as a secondary measure of operational performance.
Our business plan to achieve our principal financial objective is to:
operate our portfolio of desirable apartment homes with a high level of focus on customer selection and customer satisfaction and in an efficient manner that produces predictable and growing Free Cash Flow;
improve our portfolio of apartment communities, which is diversified both by geography and price point, by selling apartment communities with lower projected Free Cash Flow internal rates of return and investing the proceeds from such sales through capital enhancements, redevelopment, some development, and acquisitions with greater land value, higher expected rent growth, and projected Free Cash Flow internal rates of return in excess of those expected from the communities sold;
use low levels of financial leverage primarily in the form of non-recourse, long-dated, fixed-rate property debt and perpetual preferred equity, a combination that reduces our refunding and re-pricing risk and provides a hedge against increases in interest rates; and
focus intentionally on a collaborative and productive culture based on respect for others and personal responsibility.
Our business is organized around five areas of strategic focus: operational excellence; redevelopment and development; portfolio management; balance sheet; and team and culture. The results from the execution of our business plan during the three months ended March 31, 2019, are further described below.
Operational Excellence
We own and operate a portfolio of apartment communities, diversified by both geography and price point. At March 31, 2019, our portfolio included 128 apartment communities with 34,349 apartment homes in which we held an average ownership of approximately 99%.
Our property operations team produced solid results for our portfolio for the three months ended March 31, 2019. Highlights include:
Same Store portfolio maintained average daily occupancy of 97.0% throughout the three months ended March 31, 2019, a 90 basis point increase over the same period in 2018;
Same Store net operating income increased 5.5% with net operating income margins of 73.2%, a 90 basis point increase over the three months ended March 31, 2018; and
Same Store rent increases on renewals and new leases averaged 5.2% and 0.8%, respectively, for a weighted average increase of 2.9%.
Our focus on efficient operations through productivity initiatives such as centralization of administrative tasks, optimization of economies of scale at the corporate level, and investment in more durable, longer-lived materials has helped us control operating expenses. These and other innovations contributed to limiting growth in controllable operating expense (defined as property expenses less taxes, insurance and utility expenses).
Redevelopment and Development
Our second line of business is the redevelopment and some development of apartment communities. Through these activities, we expect to create value by repositioning communities within our portfolio. We measure the rate and quality of financial returns by NAV creation, an important component of Economic Income, our primary measure of long-term financial performance. We undertake ground-up development when warranted by risk-adjusted investment returns, either directly or in connection with the redevelopment of an existing apartment community. When warranted, we rely on the expertise and credit of a third-party developer familiar with the local market to limit our exposure to construction risk.
We invest to earn leverage-neutral risk-adjusted returns in excess of those expected from the apartment communities sold in “paired trades” to fund the redevelopment or development. Of these two activities, we generally favor redevelopment because it permits adjustment to the scope and timing of spending to align with changing market conditions and customer preferences.
During the three months ended March 31, 2019, we invested $45.1 million in redevelopment and development. We continued phased redevelopment activities in Miami at our Flamingo South Beach and Bay Parc communities, and ground-up construction

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at Parc Mosaic in Boulder, Colorado, The Fremont on the Anschutz Medical Campus in Denver, Colorado, and Elm Creek Townhomes in Elmhurst, Illinois.
We also began a $23.7 million full redevelopment of 707 Leahy in Redwood City, California. This 110-home community is located in one of the most dynamic job markets in the world and benefits from higher density than permitted under the current zoning code. We expect this investment to generate a Free Cash Flow internal rate of return of approximately 9%.
Please see below under the Liquidity and Capital Resources – Redevelopment and Development heading for additional information regarding our redevelopment and development investment during the three months ended March 31, 2019.
Portfolio Management
Our portfolio of apartment communities is diversified across “A,” “B,” and “C+” price points, averaging “B/B+” in quality, and is geographically diversified across several of the largest markets in the United States. We measure the quality of apartment communities in our portfolio based on average rents of our apartment homes compared to local market average rents as reported by a third-party provider of commercial real estate performance and analysis. Under this rating system, we classify as “A” quality apartment communities those earning rents greater than 125% of local market average; as “B” quality apartment communities those earning rents between 90% and 125% of local market average; as “C+” quality apartment communities those earning rents greater than $1,100 per month, but lower than 90% of local market average; and as “C” quality apartment communities those earning rents less than $1,100 per month and lower than 90% of local market average. We classify as “B/B+” quality a portfolio that on average earns rents between 100% and 125% of local market average rents. Although some companies and analysts within the multifamily real estate industry use apartment community quality ratings of “A,” “B” and “C,” some of which are tied to local market rent averages, the metrics used to classify apartment community quality as well as the period for which local market rents are calculated may vary from company to company. Accordingly, our rating system for measuring apartment community quality is neither broadly nor consistently used in the multifamily real estate industry.
As part of our portfolio strategy, we seek to sell up to 10% of our portfolio annually and to reinvest the proceeds from such sales in accretive uses such as capital enhancements, redevelopments, some developments, and selective acquisitions with projected Free Cash Flow internal rates of return higher than expected from the communities being sold. Through this disciplined approach to capital recycling, we increase the quality and expected growth rate of our portfolio.
 
Three Months Ended
 
March 31,
 
2019
 
2018
Average Revenue per Aimco apartment home (1)
$
2,181

 
$
2,052

Portfolio average rents as a percentage of local market average rents
113
%
 
113
%
Percentage A (1Q 2019 average revenue per Aimco apartment home $2,839)
52
%
 
49
%
Percentage B (1Q 2019 average revenue per Aimco apartment home $1,918)
32
%
 
35
%
Percentage C+ (1Q 2019 average revenue per Aimco apartment home $1,727)
16
%
 
16
%
(1) Represents average monthly rental and other property revenues (excluding resident reimbursement of utility cost) divided by the number of occupied apartment homes as of the end of the period.
Our average revenue per apartment home was $2,181 for the three months ended March 31, 2019, a 6% increase compared to 2018. This increase is due to year-over-year growth in Same Store revenue as well as our acquisition activities, lease-up of redevelopment communities, and the sale of communities with average monthly revenues per apartment home lower than those of the retained portfolio.
As we execute our portfolio strategy, we expect to increase average revenue per Aimco apartment home at a rate greater than market rent growth; increase Free Cash Flow margins; and maintain sufficient geographic and price point diversification to limit volatility and concentration risk.
Apartment Community Acquisitions
We evaluate potential acquisitions with an eye for unique and opportunistic investments and fund acquisitions pursuant to our strict “paired trade” discipline.
During the three months ended March 31, 2019, we made no acquisitions. In April 2019, we closed the $65.0 million acquisition of One Ardmore, the fifth and final community included in the Philadelphia portfolio acquisition announced in 2018. This 110-home apartment community is located in the heart of one of Philadelphia’s Main Line suburbs and most desirable submarkets. We acquired One Ardmore at the completion of construction and expect the community to be fully occupied before year-end.

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Dispositions
During the three months ended March 31, 2019, we sold seven apartment communities with 2,206 apartment homes for gross proceeds of $408.6 million. Proceeds, net of debt repayment and transaction costs, were $340.2 million. Three communities are located in suburban Chicago, one in Alexandria, Virginia, one in Virginia Beach, Virginia, and two in Nashville, Tennessee. Proceeds from the sales were used to complete the leverage-neutral, “paired trade” funding for the Common Stock repurchases made during the three months ended December 31, 2018.
Balance Sheet
Leverage
Our leverage strategy seeks to increase financial returns while using leverage with appropriate caution. We limit risk through balance sheet structure, employing low leverage, primarily non-recourse and long-dated property debt; build financial flexibility by maintaining ample unused and available credit as well as holding properties with substantial value unencumbered by property debt; and use partners’ capital when it enhances financial returns or reduces investment risk.
Our leverage includes our share of long-term, non-recourse, property debt encumbering apartment communities, outstanding borrowings on the revolving credit facility, and outstanding preferred equity.
For additional information regarding our leverage, please see the discussion under the Liquidity and Capital Resources heading.
Leverage Ratios
Our target ratios are Proportionate Debt and Preferred Equity to Adjusted EBITDAre below 7.0x and Adjusted EBITDAre to Adjusted Interest Expense and Preferred Dividends greater than 2.5x. Our leverage ratios for the three months ended March 31, 2019, are presented below:
 
Leverage Ratios (1)
 
Pro forma Leverage Ratios (2)
Proportionate Debt to Adjusted EBITDAre
6.8x
 
 7.0x
Proportionate Debt and Preferred Equity to Adjusted EBITDAre
7.2x
 
 7.2x
Adjusted EBITDAre to Adjusted Interest Expense
3.4x
 
 3.3x
Adjusted EBITDAre to Adjusted Interest Expense and Preferred Dividends
3.1x
 
 3.2x
(1)
Adjusted EBITDAre has been calculated on a pro forma basis to reflect the disposition of seven apartment communities during the period as if the transactions had closed on January 1, 2019.
(2)
Our ratio of Pro forma Proportionate Debt and Preferred Equity to Adjusted EBITDAre has been calculated on a pro forma basis to reflect the redemption of our Class A Perpetual Preferred Stock as if it had occurred using cash on hand on March 31, 2019. Our Pro forma coverage ratios have been calculated on a pro forma basis to reflect the redemption of our Class A Perpetual Preferred Stock as if it had occurred on January 1, 2019.
We calculate Adjusted EBITDAre and Adjusted Interest Expense used in our leverage ratios based on the most recent three month amounts, annualized.
In 2019, we retitled our Adjusted EBITDA measure to Adjusted EBITDAre in our calculation of leverage ratios. The computation of Adjusted EBITDAre has been modified from our prior measure to include amortization of debt issuance costs as a component of interest expense in both the computation of Adjusted Interest Expense and EBITDAre. The impact of this change is less than 0.1x to each ratio. We also began including a reconciliation of net income to earnings before interest, taxes, depreciation and amortization for real estate, or EBITDAre, as defined by Nareit. Please refer to the Leverage Ratios section below.
Liquidity
Our liquidity consists of cash balances and available capacity on our revolving line of credit. As of March 31, 2019, we had cash and restricted cash of $198.4 million and had the capacity to borrow up to $723.1 million on our revolving credit facility, after consideration of $6.9 million of letters of credit backed by the facility. We use our credit facility primarily for working capital and other short-term purposes and to secure letters of credit.
We manage our financial flexibility by maintaining an investment grade rating and holding apartment communities that are unencumbered by property debt. At March 31, 2019, we held unencumbered apartment communities with an estimated fair market value of approximately $2.5 billion. In April 2019, we repaid, at par, $167.5 million of property-level debt maturing during the

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three months ended September 30, 2019, increasing the estimated value of our pool of unencumbered apartment communities to by $740.0 million to $3.3 billion.
Two credit rating agencies rate our creditworthiness using different methodologies and ratios for assessing our credit, and both have rated our credit and outlook as BBB- (stable), an investment grade rating. Although some of the ratios they use are similar to those we use to measure our leverage, there are differences in our methods of calculation and therefore our leverage ratios disclosed above are not indicative of the ratios that may be calculated by these agencies.
Equity Capital Activities
On February 3, 2019, our Board of Directors declared a special dividend valued at $2.02 per share of Common Stock that consisted of $67.1 million in cash and 4.5 million shares of Common Stock, which was distributed on March 22, 2019. In order to facilitate comparisons with previous periods, our Board of Directors authorized a reverse split to neutralize the effect of the stock dividend. Taken together, the total number of shares outstanding after the stock dividend and reverse split was unchanged by the two actions.
On April 29, 2019, our Board of Directors declared a quarterly cash dividend of $0.39 per share of Class A Common Stock for the quarter ended March 31, 2019, representing an increase of 3% compared to the dividends paid during the three months ended June 30, 2018. This dividend is payable on May 31, 2019 to stockholders of record on May 17, 2019.
Team and Culture
Our team and culture are keys to our success. Our intentional focus on a collaborative and productive culture based on respect for others and personal responsibility is reinforced by a preference for promotion from within based on succession planning and talent development to produce a strong, stable team that is the enduring foundation of our success. In 2018, we were recognized by the Denver Post as a Top Work Place for the sixth consecutive year, an accomplishment shared with only seven other companies in Colorado.
Key Financial Indicators
The key financial indicators that we use in managing our business and in evaluating our operating performance are Economic Income, our measure of long-term total return, and AFFO, our measure of current return. In addition to these indicators, we evaluate our operating performance and financial condition using: Pro forma FFO; Free Cash Flow; Same Store property net operating income; proportionate property net operating income; average revenue per effective apartment home; leverage ratios; and net leverage.
Results of Operations
Because our operating results depend primarily on income from our apartment communities, the supply of and demand for apartments influences our operating results. Additionally, the level of expenses required to operate and maintain our apartment communities and the pace and price at which we redevelop, acquire and dispose of our apartment communities affect our operating results.
The following discussion and analysis of the results of our operations and financial condition should be read in conjunction with the accompanying condensed consolidated financial statements included in Item 1.
Financial Highlights
Net income attributable to common stockholders per common share increased by $1.34 during the three months ended March 31, 2019 compared to 2018, primarily due to gains on the sale of apartment communities in 2019.
Pro forma FFO per share increased $0.02 for the three months ended March 31, 2019 compared to 2018 due to the following items:
$0.04 from Same Store property net operating income growth of 5.5%, driven by a 4.2% increase in revenue, offset by a 0.8% increase in expenses;
$0.05 from net operating income contributions from redevelopment communities and 2018 property acquisitions; and
$0.01 lower interest expense; offset by
($0.08) contribution eliminated following the 2018 sale of the Asset Management business and sales in 2018 and 2019 of apartment communities to fund our investment activities.

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AFFO per share increased $0.01 year-over-year due to the $0.02 increase in Pro forma FFO, offset $0.01 by an acceleration of capital replacement spending as compared to the previous year. For the year ended December 31, 2019, we expect total capital replacement spending to decline year-over-year as our portfolio continues to be upgraded with our capital invested in fewer, but more valuable, properties.
Detailed Results of Operations for the Three Months Ended March 31, 2019 compared to March 31, 2018
Net income attributable to Aimco increased by $190.3 million during the three months ended March 31, 2019 as compared to 2018. Net income attributable to the Aimco Operating Partnership increased by $201.7 million during the three months ended March 31, 2019 as compared to 2018. Details regarding the increases in net income are described more fully below.
Property Operations
As further described below, we have four segments: Same Store, Redevelopment and Development, Acquisition and Other Real Estate. Our Same Store segment includes Same Store communities, which are those that have reached a stabilized level of operations as of the beginning of a two-year comparable period and maintained it throughout the current and comparable prior year, and are not expected to be sold within 12 months. Our Redevelopment and Development segment includes apartment communities that are currently under construction that have not achieved a stabilized level of operations, and those that have been completed in recent years that have not achieved and maintained stabilized operations for both the current and comparable prior year. Our Acquisition segment includes those apartment communities which we have acquired since the beginning of a two-year comparable period. Our Other Real Estate segment primarily includes apartment communities that are subject to limitations on rent increases and communities that we expect to sell within 12 months but do not yet meet the criteria to be classified as held for sale.
As of March 31, 2019, our Same Store segment included 96 Same Store apartment communities with 28,039 apartment homes.
From December 31, 2018 to March 31, 2019, on a net basis, our Same Store segment increased by three apartment communities and 2,134 apartment homes. These changes consisted of:
the addition of seven redeveloped apartment communities with 2,698 apartment homes and one developed apartment community with 310